Scotland’s PRS faces a rent control crisis as supply declines

Scotland’s private rented sector (PRS) is facing a perfect storm of rising rents and concerns about dwindling supply as the Scottish government pushes for rent controls, one firm says.

CityLets warns that as the Scottish Government continues to push forward with legislation to control rents in PRS hotspots, there’s overwhelming evidence of their detrimental impact on rental markets.

Unfortunately, the government is showing no signs of backing down over its Housing (Scotland) Bill 2024.

Critics say the proposed law is a concession to the Scottish Greens who no longer share power with the SNP, which aims to introduce rent controls in areas with high rental demand.

Rent controls across nations

The firm’s managing director, Thomas Ashdown, said: “It is unlikely that the authoritative and independent economic findings on rent controls across nations has been overlooked by the administration which begs the question as to why there has been no clear response.

“Perhaps vote winning soundbite politics is deemed paramount with ‘rent control’ such an obvious winner but what is the point of retaining power if it comes at a cost to those it purports to serve?”

He added: “We have a housing emergency. There is an absolute duty to the people of Scotland that good intentions do not make things worse.

“To that end, there must be clear, immediate open engagement with the facts from independent industry experts.”

Rent controls have an overall negative net impact

A recent report by the Institute of Economic Affairs (IEA) found that rent controls have an overall negative net impact on markets.

It found that controls reduce the quality and quantity of rental supply and lead to wider socio-economic concerns such as reduced labour mobility.

CityLets says that landlords in Scotland may finally see some relief without the prospect of rent controls with interest rates on the decline, and the possibility of a more stable political landscape.

However, official figures from the Scottish Government show a clear decline in the number of households in both the PRS and social housing in recent years.

While the census indicates a rise in the PRS over the past decade, the growth has slowed significantly, and the sector is now in decline from its peak in 2022.